Tuesday, May 17, 2005

Reduced Steel Demand

Whilst Steelmakers have been posting good financial results for 2004, things are not looking so rosy for this year.
Corus shares fell back further yesterday against forecasts of greatly reduced steel demand during the remainder of 2005. Cutbacks in production are unlikely to be successful in maintaining or increasing price levels as increased production comes online from Russia and former CIS facilities. Whilst EC quota limits may restrict imports to some extent, the availability of surplus material on the world market will inevitably impact European steelmakers.

“Corus Group Plc (CS/ LN): Chief Executive Philippe Varin predicted global steel demand growth will halve to 4 percent this year, led by declining North American demand. The shares declined 2 pence, or 7.4 percent, to 40.5 pence.”

“Western European steelmakers are cutting output in an attempt to maintain steel prices. Arcelor S.A. (BBB/Stable/A-2) announced in March 2005, for example, that it would trim 1 million tonnes from its flat carbon operations in Europe after a 14% fall in demand for these products in the EU. Such cutbacks may prove fruitless, however, as the indications are that Russian and CIS steelmakers--including rated players OAO Magnitogorsk Metallurgical Kombinat (MMK; BB-/Stable/--) and OAO Severstal (B+/Stable/--)--along with export-orientated steel producers in other emerging markets, will step in to fill the gap. Russian steelmakers have been steadily increasing production since 2001. Moreover, according to the International Iron and Steel Institute, while EU producers reduced crude steel output by 0.3% in the first quarter of 2005, Russian steel production increased by 2.7%.”

Source Interfax

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